Demme v. Healthcare Insurance Reciprocal of Canada

COURT OF APPEAL FOR ONTARIO

CITATION: Demme v. Healthcare Insurance Reciprocal of Canada, 2022 ONCA

503

DATE: 20220630

DOCKET: C69342

Gillese, Pardu and Brown JJ.A.

BETWEEN

Catherina Demme

Plaintiff (Appellant)

and

Healthcare Insurance Reciprocal of Canada

Defendant (Respondent)

Michael Burgar and Simon Cox, for the appellant

Michael Girard and Jonathan Gutman, for the respondent

Heard: February 10, 2022 by video conference

On appeal from the order of Justice William S. Chalmers of the Superior Court of

Justice, dated March 10, 2021, with reasons reported at 2021 ONSC 2095.

Brown J.A.:

Page: 2

I.

OVERVIEW

This appeal engages the issue of a commercial liability insurer’s duty to

[1]

defend an action brought against an employee of the insured that is based on the

tort of intrusion upon seclusion.

[2]

The appellant, Catharina Demme, is a former registered nurse who worked

at the Brampton Civic Hospital (the “Hospital”) until December 2016. The Hospital

ended Ms. Demme’s employment at that time upon discovering that she had

misused an automatic medication dispensing unit (“ADU”) over an extended period

– from 2006 until 2016 – to obtain approximately 24,000 Percocet tablets.

Ms. Demme had used patient records to wrongfully access the ADU and obtain

the Percocet.

[3]

The Hospital notified 11,358 patients whose medical records were affected.

Subsequently, in 2017, 2018 and 2019 eight civil actions were started by patients

against Ms. Demme and the Hospital (the “Underlying Actions”). One such action,

Stewart v. Demme and William Osler Health System, CV-17-574574-00CP

(“Stewart”), initially was certified as a class action but the certification was

Page: 3

overturned on appeal to the Divisional Court: Stewart v. Demme, 2022 ONSC

1790, 81 C.C.L.T. (4th) 64 (Div. Ct.).¹

[4]

Similar, but not identical, allegations were made against Ms. Demme in all

eight actions.

[5]

The Hospital is a subscribing member of the Healthcare Insurance

Reciprocal of Canada (“HIROC”), which insures hospitals and their employees.

It is insured under Composite Healthcare Insurance Master Policy 2016/1 (the

“Policy”). Employees of the Hospital may be additional insureds under the Policy

under certain conditions.

[6]

HIROC appointed counsel to represent the Hospital in the Underlying

Actions.

[7]

Ms. Demme requested HIROC also provide her with defences to the

Underlying Actions. In July 2017, HIROC advised Ms. Demme that there was no

coverage under the Policy for the allegations advanced against her.

[8]

Ms. Demme filed defences in each Underlying Action using her own counsel.

¹The other seven actions are: 2017 Actions: (i) Darragh v. William Osler Health System et. al., CV-17-

2065-00 (May 11, 2017); (ii) Calabretta v. William Osler Health System et. al., CV-17-3394-00 (August 8,

2017); 2018 Actions: D’Cruz v. William Osler Health System et. al., CV-18-597669 (May 11, 2018);

Hanson v. William Osler Health System et. al., CV-18-00603616 (August 20, 2018); 2019 Actions: (v)

Draga v. William Osler Health System et. al., Small Claims Court SC-19-3850 (July 10, 2019); (vi) Munt v.

William Osler Health System et. al., CV-19-00001684 (April 18, 2019); and (vii) Emoff v. William Osler

Health System et. al., CV-19-00001685 (April 18, 2019). The Emoff action has been dismissed without

costs.

Page: 4

[9]

On July 25, 2019, Ms. Demme commenced this action against HIROC

seeking a declaration that HIROC owes her a duty to defend the Underlying

Actions and related relief. HIROC defended. In late 2020, Ms. Demme moved for

summary judgment for such a declaration, a further declaration that she is an

additional insured under certain HIROC policies of insurance and therefore is

entitled to liability coverage, as well as payment of the legal defence costs she had

incurred to date in defending the actions against her.

[10] By reasons dated March 10, 2021, the motion judge dismissed the motion

and ordered costs of the motion in the amount of $20,000 against Ms. Demme.

[11] Ms. Demme appeals the dismissal of her summary judgment motion and

seeks leave to appeal the costs award.

[12] For the reasons set out below, I would dismiss her appeal.

II.

THE ALLEGATIONS PLEADED AGAINST MS. DEMME

The allegations in the statements of claim

[13] As mentioned, similar, but not identical, allegations were made against

Ms. Demme in the Underlying Actions. In the court below and on this appeal,

counsel focused on the allegations against Ms. Demme pleaded in the Stewart

action. The Amended Statement of Claim in the Stewart action asserted a single

cause of action against Ms. Demme – the tort of intrusion upon seclusion, which

was recognized by this court in Jones v. Tsige, 2012 ONCA 32, 108 O.R. (3d) 241.

Page: 5

[14] The main allegations pleaded in the Stewart action’s Amended Statement of

Claim are as follows:

II. Intrusion Upon Seclusion

13. Beginning on a date which is known to the

Defendants, but which the Defendants have not

disclosed to the Plaintiff, and which is at least ten years

ago, but probably more, and continuing until at least April

2017, the Defendant Demme surreptitiously accessed

the confidential personal information of the Plaintiff and

of the Class Members without their knowledge or

consent. In so doing, she committed the tort of intrusion

upon seclusion.

14. The intrusions upon seclusion committed by the

Defendant Demme were enabled and facilitated by the

Defendant Osler, which provided her with unfettered

access to such information.

15. The intrusions upon seclusion in issue occurred at

Ieast hundreds, and possibly thousands, of times, and

were committed by Demme for the purpose of obtaining

illicit access to the narcotic drug Percocet, which she was

both selling on the street for a profit, and consuming

herself.

16. The intrusions upon seclusion committed by the

Defendant Demme were committed by her during the

course of her employment by Osler, using means which

were furnished to her by the Defendant Osler at her

workplace, during working hours.

…

35. The information accessed by the Defendant Demme

provided the said Defendant with a window into the most

intimate, personal, private, and embarrassing aspects of

the Plaintiffs and Class Members' lives.…

…

Page: 6

43. The Plaintiff states and the fact is that the Defendant

Demme had no legitimate purpose, whether business,

medical, or otherwise, in accessing the confidential

information of the Plaintiff and the Class Members. She

was an electronic thief, stealing the Plaintiff and class

members' data for her own personal gain.

…

III. Direct Liability

48. By conducting herself in the manner set out in this

Amended Statement of Claim, Demme repeatedly

committed the tort of intrusion upon seclusion and is

liable to the Plaintiff and class members.

…

VII. Damages

72. The Defendant Demme intentionally or recklessly and

without lawful justification intruded upon the seclusion of

the private affairs and concerns of the Plaintiff and the

Class Members in such a way that a reasonable person

would regard as highly offensive, thereby causing

distress, humiliation, anguish, and pecuniary losses to

the Plaintiff and the Class Members. Moreover, she did

so for the highly improper motives particularized

hereinabove. Such misconduct ought to be strongly

discouraged and punished, and a generous award is the

only way to do so.

[15] Other Underlying Actions also plead claims against Ms. Demme for the tort

of intrusion upon seclusion.²The Stewart and Draga actions are the only ones that

²Intrusion upon seclusion claims: Calabretta claim, paras. 10-11; Darragh claim, paras. 8-9; D’Cruz

claim, paras. 8-9; Hanson claim, at para. 10; Draga claim, paras. 18, 27 & 30; Munt claim, paras. 8-9;

Emoff claim, paras. 10-11.

Page: 7

plead intentional and reckless conduct by Ms. Demme in committing the tort; the

others confine their pleading to intentional conduct only.

[16] Some of the Underlying Actions advance additional causes of action against

Ms. Demme:

(i) Negligence: The pleading in the Calabretta action is representative of

such a claim. It alleges that Ms. Demme failed to ensure the plaintiff’s

personal and health information remained confidential and used such

information for improper purposes;³

(ii) Breach of the provisions of the Personal Health Information Protection

Act, 2004, S.O. 2004, c. 3, Sched. A, by accessing and misusing the

plaintiff patient’s personal and health information;⁴

(iii) Breach of fiduciary duty by accessing and using the personal and health

information of the patient to obtain narcotics;⁵and

(iv) Negligent infliction of mental and emotional distress by reason of the

manner in which the patient’s privacy was breached by Ms. Demme.⁶

³Negligence claims: Calabretta claim, para. 9C; Darragh claim, para. 7B; D’Cruz claim, para. 7B;

Munt claim, para. 7B; Emoff claim, para. 9B.

⁴Breach of statute claims: Calabretta claim, para. 13; Darragh claim, para. 11; D’Cruz claim, para. 11;

Draga claim, para. 29; Munt claim, para. 11; Emoff claim, para. 13.

⁵Breach of fiduciary duty claims: Calabretta claim, para. 14; Darragh claim, para. 12; D’Cruz claim,

para. 14; Hanson claim, at para. 15; Munt claim, para. 12; Emoff claim, para. 14.

⁶Negligent infliction of mental and emotional distress: Hanson action, para. 19.

Page: 8

The status of the claims in the Stewart action

[17] In late 2019, Morgan J. heard two motions in the Stewart action. In one, the

plaintiff sought to certify the Stewart action as a class proceeding. In the other, the

Hospital and Ms. Demme sought summary judgment dismissing the Stewart action

on the grounds that the Stewart plaintiff’s allegations did not meet the criteria for

liability under the torts of intrusion against seclusion and negligence.

[18] By reasons dated January 6, 2020,⁷Morgan J. held that the claim alleging

intrusion upon seclusion disclosed a cause of action under s. 5(1)(a) of the

Class Proceedings Act, 1992, S.O. 1992, c. 6, but what he construed as a claim

alleging negligence did not. He certified the action as a class proceeding but

granted summary judgment dismissing what he construed to be the claims in

negligence.⁸

[19] The Divisional Court allowed an appeal from Morgan J.’s certification order

and dismissed Ms. Stewart’s motion to certify her action for intrusion upon

seclusion: Stewart v. Demme, 2022 ONSC 1790.⁹The Divisional Court did not see

⁷Stewart v. Demme, 2020 ONSC 83, 63 C.C.L.T. (4th) 93, leave to appeal to Ont. C.A. requested, M53325.

8

In his reasons, Morgan J. states that the Amended Statement of Claim pleaded a claim in negligence

against Ms. Demme, notwithstanding that the pleading does not contain an express plea to that effect. At

one point in his reasons, he describes the claim in negligence as one asserted against the Hospital: at para.

62; elsewhere, he describes it as a claim against both the Hospital and Ms. Demme: at para. 81. I do not

read the Amended Statement of Claim as asserting a claim in negligence against Ms. Demme. In my view,

it patently pleads only a claim for intrusion upon seclusion and my analysis proceeds on that basis.

⁹Ms. Stewart has sought leave to appeal to this court from the decision of the Divisional Court: Ont. C.A.

court file no. M53325.

Page: 9

any need to deal with the arguments regarding that part of the summary judgment

which had dismissed the negligence claims.

[20] In my view, the decision of the Divisional Court does not affect the outcome

of this appeal. The Stewart action remains alive, albeit reduced to a personal,

singular claim by Ms. Stewart in which the cause of action asserted against

Ms. Demme is intrusion upon seclusion.

III.

THE HIROC POLICY AND HIROC’S DENIAL OF A DEFENCE

[21] The HIROC Policy provides coverage for claims for bodily injury arising out

of an “occurrence”:

1. COVERAGE A – BODILY INJURY

To pay on behalf of the Insured all sums which the

Insured shall become legally obligated to pay as

damages because of bodily injury, sickness or disease,

including death at any time resulting therefrom, by any

person or persons and arising from an occurrence during

the POLICY PERIOD.

[22] The Policy defines “bodily injury” as follows:

Except with respect to advertising, broadcasting or

telecasting by or in the interest of the Insured (unless

specifically indicated on a Certificate of Insurance issued

under this Master Policy), the term “bodily injury”

means bodily injury, sickness or disease, including death

and shall also include injury arising out of:

…

Page: 10

(c) Invasion or violation of the right of

privacy, wrongful eviction or wrongful entry;

(d) Mental anguish, injury, shock,

humiliation, disease, sickness or

disability … [Emphasis added.]

[23] The Policy defines “occurrence” to mean:

… [A]n accident, including continuous or repeated

exposure to substantially the same general conditions,

which result in bodily injury or property damage neither

expected nor intended from the standpoint of the

Insured. [Emphasis added.]

[24] In denying Ms. Demme a defence, HIROC relies on two fortuity clauses in

the Policy, the intentional act and criminal act exclusions, which read:

This insurance shall not provide insurance against

liability:

1. Arising out of:

…

(b) Bodily Injury or Property Damage

expected or intended from the standpoint

of the Insured. This exclusion does not

apply to bodily injury resulting from use of

reasonable force to protect persons or

property;

…

(e) Bodily injury, sickness or disease,

including death at any time resulting

therefrom, arising out of the performance

of a criminal act, except in respect of the

coverage provided in C1. This exclusion

shall not apply to any Insured’s not having

knowledge of or being a party to such a

criminal act. [Emphasis added.]

Page: 11

[25] The Policy’s Special Provisions name, as additional insureds, all employees

of the named insured Hospital, but “only in the course of their employment on

behalf of” the Hospital. The Additional Insuring Agreements in the Policy include

an agreement that HIROC will “[d]efend in the name of and on behalf of the Insured

any suit against the Insured even if such suit is groundless, false or fraudulent ...”

[26] On the motion, HIROC relied on two sets of pleaded defences to explain

why it is not required under the Policy to provide Ms. Demme with a defence.

[27] First, HIROC pleaded that the allegations in the Underlying Actions do not

amount to an “occurrence” because the bodily injury arising from Ms. Demme’s

conduct was “expected or intended” by her. Alternatively, but relatedly, HIROC

pleads that the allegations are excluded by Policy exclusion 1(b) – the intentional

act exclusion – as the bodily injury was expected or intended by Ms. Demme.

[28] Second, HIROC pleaded that the allegations against Ms. Demme in the

Underlying Actions constitute the performance of a criminal act, which is excluded

by Policy exclusion 1(e), the criminal act exclusion. Specifically, HIROC pleads:

10. On March 30, 2017, the plaintiff was charged with

breach of trust and theft under $5,000 contrary to the

Criminal Code in connection with the theft of medication

from the Hospital. On September 1, 2017, the plaintiff

pleaded guilty to the charges.

11. The conduct admitted by Demme also constitutes the

crimes of fraudulent concealment contrary to s.341,

unauthorized use of computer contrary to s.342.1, and

Page: 12

destroying or altering computer data contrary to s.

430(1.1) of the Criminal Code and the crime of

possession under the Controlled Drug and Substances

Act s. 4(1).

IV. THE MOTION JUDGE’S REASONS

[29] There is no dispute the motion judge correctly stated the principles that guide

a duty to defend analysis, namely:

 The insurer has a duty to defend if the pleadings filed against the insured

allege facts which, if true, would require the insurer to indemnify the

insured;

 If there is a mere possibility that the claim falls within the liability coverage,

the insurer must defend;

 The court must look beyond the labels used by the plaintiff to ascertain the

“substance” and “true nature” of the claims. It must determine whether the

factual allegations, if true, could possibly support the plaintiff's legal claims;

 The court should determine if any claims pleaded are entirely “derivative”

in nature, within the meaning of that term as set out in Non-Marine

Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R.

551. A derivative claim will not trigger a duty to defend;

 If the pleadings are not sufficiently precise to determine whether the claims

would be covered by the policy, the insurer's obligation to defend will be

Page: 13

triggered where, on a reasonable reading of the pleadings, a claim within

coverage can be inferred;

 In determining whether the policy would cover the claim, the usual

principles governing the construction of insurance contracts apply, namely,

the contra proferentem rule and the principle that coverage clauses should

be construed broadly and exclusion clauses narrowly, as well as the

desirability, where the policy is ambiguous, of giving effect to the

reasonable expectations of the parties;

 Extrinsic evidence that has been explicitly referred to in the pleadings may

be considered to determine the substance and true nature of the

allegations; and

 An insurer’s duty to defend is determined on the allegations made in the

relevant statement of claim and policy; no other evidence generally is

admissible.

See: Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, [2001] 2

S.C.R. 699, at paras. 28-35; Progressive Homes Ltd. v. Lombard General

Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at paras. 23-24;

Panasonic Eco Solutions Canada Inc. v. XL Specialty Insurance Company, 2021

Page: 14

ONCA 612, 466 D.L.R. (4th) 276, at para. 22; and Tedford v. TD Insurance

Meloche Monnex, 2012 ONCA 429, 112 O.R. (3d) 144, at para. 14.

[30] There is also no dispute that the motion judge’s analysis followed the correct

sequence of steps. First, he reviewed the pleadings to determine the true nature

of the claims that were properly pleaded; next, he considered whether any claims

were wholly derivative in nature; finally, he considered whether any of the properly

pleaded, non-derivative claims could potentially trigger the insurer’s duty to defend:

Scalera, at paras. 50-52.

[31] As to the first step, the motion judge concluded that the true nature of the

claims against Ms. Demme is the intentional tort of intrusion upon seclusion. He

stated there can be no liability for the tort of intrusion upon seclusion unless there

is a finding that the defendant intended to intrude upon the seclusion of another:

at para. 31.

[32] At the second step, the motion judge determined that the claims in

negligence pleaded in some of the Underlying Actions are entirely derivative of the

intentional tort of intrusion upon seclusion: at paras. 39 and 40.

[33] Finally, in dealing with the third step of the analysis, the motion judge first

considered whether the injuries alleged by the plaintiffs arose out of an

“occurrence” and, then, whether the claims were excluded by the Policy’s

intentional act and criminal act exclusions.

Page: 15

[34] The motion judge concluded there was no possibility the claims against

Ms. Demme for intrusion of seclusion could fall within the insuring agreement

because the injuries alleged were not caused by an “occurrence,” as defined in the

Policy, as the injuries were not unexpected or unintended on the part of

Ms. Demme. Although that conclusion was determinative of the motion, the motion

judge went on to consider whether HIROC, as insurer, had established that the

intentional act and criminal act exclusions applied to the claims asserted against

Ms. Demme in the Underlying Actions.

[35] The motion judge concluded that HIROC had established the intentional act

exclusion applied to the claims advanced, for reasons similar to those supporting

his conclusion that an occurrence had not taken place: at para. 56. He also found

that the statements of claim in the Underlying Actions alleged that the harm was

caused by conduct of Ms. Demme that was criminal in nature, thereby attracting

the application of the criminal act exclusion. As he stated at para. 64: “Accessing

the patient records was part and parcel of the theft of the medication and arose out

of the performance of a criminal act.”

[36] Finally, the motion judge did not accept Ms. Demme’s submission that to

interpret the Policy in a way that denied coverage for claims asserting the tort of

intrusion upon seclusion would run afoul of the jurisprudence directing courts to

Page: 16

avoid an interpretation of a policy that would substantially nullify coverage: at

paras. 70-72.

[37] For those reasons, the motion judge dismissed Ms. Demme’s motion for an

order that HIROC was under a duty to defend the Underlying Actions.

V.

THE ISSUES ON APPEAL

[38] Ms. Demme argues that the motion judge erred in dismissing her motion by

failing to consider the four corners of the pleadings in the Underlying Actions for

all possibilities of coverage, misapplying the decision of this court in Oliveira v.

Aviva Canada Inc., 2018 ONCA 321, 79 C.C.L.I. (5th) 65, and erroneously applying

the Policy’s intentional act and criminal act exclusions. Based on my understanding

of the appellant’s submissions, I propose to group and address the issues she

raises on the appeal as follows:

 Did the motion judge misapply the pleadings rule?

 Did the motion judge err in his treatment of the issue of intentionality in

respect of coverage for an “occurrence” and the intentional act exclusion?

 Did the motion judge err in applying the criminal act exclusion?

 Did the motion judge fail to interpret the Policy so as to avoid nullifying its

coverage?

[39] I shall deal with each issue in turn.

Page: 17

VI.

FIRST ISSUE: DID THE MOTION JUDGE MISAPPLY THE PLEADINGS

RULE?

[40] The “pleadings rule” governs the duty to defend analysis. According to the

rule, an insurer must defend if the allegations in the pleadings in the third-party

action raise the “mere possibility” that a claim within the policy may succeed. As

mentioned in para. 30 above, the case law has developed a three-step process to

apply the pleadings rule: Barbara Billingsley, General Principles of Canadian

Insurance Law, 3rd ed. (LexisNexis Canada, 2020), at Ch. 4, C.2.a. There is no

dispute the motion judge followed that three-step process.

[41] While the usual duty to defend analysis considers the allegations pleaded in

the statement of claim against the insured, this court has recognized that all

pleadings may be considered, albeit with the most weight given to the pleadings

against the insured: Keys v. Intact Insurance Company, 2015 ONCA 400, 50

C.C.L.I. (5th) 189, at para. 4. Billingsley observes that the weight of lower-court

authority recognizes considering defence pleadings that include admissions of

fact, such as in the present case: General Principles of Canadian Insurance Law,

at Ch. 4, C.2.b.

[42] The motion judge grounded his duty to defend analysis in the statements of

claim in the Underlying Actions and admissions contained in Ms. Demme’s

defences thereto. Ms. Demme does not argue the motion judge erred by taking

into account facts she pleaded in her statements of defence. Indeed, the position

Page: 18

she took below precludes her from so doing, for in her reply factum below she

requested the motion judge to consider her statements of defence as part of his

pleadings rule analysis. The motion judge did what Ms. Demme asked him to do.

[43] Ms. Demme’s pleadings-related complaint appears to boil down to the

following: while it was open to the motion judge to use admissions pleaded in her

statements of defence, he failed to give sufficient weight to two sets of facts

pleaded in her defences when ascertaining whether there was a “mere possibility”

that a pleaded claim would trigger coverage and therefore a duty to defend.

[44] The first set of pleaded facts was that at all relevant times Ms. Demme was

suffering from an addiction to painkillers resulting from chronic hip and knee joint

pain. Her statements of defence common to all the Underlying Actions pleaded

that “she developed a narcotic painkiller addiction, which …. compelled her to seek

another source of Percocet” and “she misused the ADU device for the purpose of

procuring Percocet tablets solely for her own personal consumption.”

[45] Her second set of pleaded facts was that the intended targets of her actions

were the Percocet pills, not the information of the patients contained in their

records which she used to obtain Percocet from the ADU machine. In her

statements of defence, she pleaded that:

 At no time did she have any malicious or devious intent to abuse private or

confidential information. Her ability to formulate any conscious intent was

Page: 19

compromised by her pain and her addiction. She was engaged in

unconscious, drug-seeking behavior and had no specific intent to cause harm

to the plaintiff or any patient; and

 She denied she committed the tort of intrusion upon seclusion against the

plaintiffs because she did not have any intent to invade, or engage in any

reckless conduct that related to an invasion of, the plaintiff’s private

information or concerns. Instead, she was in the grips of an illness or disease

and her behavior was unconscious or, alternatively, intent only on procuring

Percocet to feed an addiction.

[46] While those pleaded explanations or justifications were not ignored by

motion judge, they did not play a significant role in his duty to defend analysis.

Understandably so. The motion judge’s analysis properly focused on considering

the nature of the claims asserted against Ms. Demme within the terms of coverage

provided by the Policy, rather than on her pleaded explanations for what she did

or why she did it. Accordingly, I see no error in the pleadings he chose to review

for his duty to defend analysis.

[47] The actual consideration the motion judge gave those two sets of pleaded

facts shall be considered when dealing with the remaining issues on appeal.

[48] Finally on this ground of appeal, Ms. Demme criticizes the motion judge for

referring to para. 15 of the Stewart Statement of Claim where that plaintiff alleged

Page: 20

Ms. Demme not only consumed the drugs she stole, but also sold them on the

street for a profit.¹⁰She argues that in so doing the motion judge “isolated and

emphasized the most inflammatory and negative allegation” against Ms. Demme

and gave it undue weight instead of more thoroughly reviewing the four corners of

the entirety of the pleadings.

[49] I see no basis for this complaint. The use the motion judge made of para. 15

of the Stewart claim was limited to concluding that Stewart had pleaded a causal

link between Ms. Demme’s numerous intrusions upon seclusion and the resulting

access such intrusions gave her to the narcotics: at para. 61. What use

Ms. Demme may or may not have made of the narcotics she ultimately obtained

did not play a role in his analysis.

VII.

SECOND ISSUE: DID THE MOTION JUDGE ERR IN HIS TREATMENT

OF THE ISSUE OF INTENTIONALITY IN RESPECT OF COVERAGE

FOR AN “OCCURRENCE” AND THE INTENTIONAL ACT

EXCLUSION?

[50] The issue of the intentionality of the acts of Ms. Demme that are the basis

of the claims against her has two parts: (i) the motion judge held that the claims

for damages for bodily injury did not arise from an “occurrence” because

Ms. Demme’s conduct did not result in bodily injury that was “neither expected nor

intended from the standpoint of the Insured”; and (ii) the motion judge held that the

¹⁰Paragraph 15 of the Stewart Statement of Claim is reproduced above at para.14 of these reasons.

Page: 21

claims for damages advanced fell within the intentional act exclusion that stipulated

the Policy did not provide insurance against liability arising out of bodily injury

“expected or intended from the standpoint of the Insured.” The motion judge found

that the claims pleaded against Ms. Demme did not involve an “occurrence” and

fell outside the Policy’s coverage by operation of the intentional act exclusion.

[51] Ms. Demme advances three submissions about why those conclusions by

the motion judge were in error.

The decision in Oliveira

[52] First, Ms. Demme submits the motion judge erred by failing to follow the

decision of this court in Oliveira, which she contends stands as binding authority

for the proposition that where a hospital’s insurance provides coverage for claims

of “invasion or violation of the right of privacy,” actions against a hospital employee

for unlawfully accessing patient records and information involve the sort of conduct

the policy was intended to cover and respond to.

[53] I do not read the decision in Oliveira in that way. The issues about the

language of coverage and exclusion at play on this appeal simply were not

considered in Oliveira.

[54] In that case, the claims asserted in the underlying action included a pleading

of the tort of intrusion upon seclusion: specifically, that Oliveira, a hospital nurse,

had wrongfully accessed the records of the plaintiff patient, who was not under her

Page: 22

care. The hospital’s policy provided coverage for a civil proceeding alleging

damages due to personal injury, which was defined to include “invasion or violation

of privacy,” and “invasion or violation of the right of privacy.”

[55] The hospital’s insurer declined to provide Oliveira with a defence, taking the

position that she was not acting under the direction of the hospital in relation to the

claim and because the claim against her did not arise from the operations of the

hospital. As a result, according to the insurer, Oliveira did not fall within the policy’s

definition of additional insured.

[56] The application judge rejected the insurer’s position. He held: the policy did

not limit coverage for privacy breaches to hospital employees within a patient’s

circle of care; Oliveira was “acting under the direction of” the hospital; and the

allegations against her arose from the hospital’s operations. During the course of

his analysis, the application judge noted that claims for intrusion upon seclusion

fell within the covered conduct of “invasion of privacy” and such claims, by their

nature, involved the unauthorized accessing of a patient’s information.

[57] On appeal, this court substantially agreed with the application judge’s

reasons. However, this court’s short endorsement dealt only with the issue of

whether the nurse employee was an additional insured under the hospital’s policy.

Like the application judge, this court rejected the insurer’s argument that the

unlawful accessing of patient records could not “arise” from the operations of a

Page: 23

hospital or be considered “at the direction of the named insured”: Oliveira v. Aviva

Canada Inc., 2018 ONCA 321, 79 C.C.L.I. (5th) 65, at paras. 2-3.

[58] As can be seen, the decisions of both courts in Oliveira focused on whether

the employee nurse was an additional insured within the meaning of the policy’s

language. Neither decision considered the effect of any definition of “occurrence”

or an intentional act exclusion on the question of whether the insurer owed the

employee nurse a duty to defend claims against her alleging intrusion of seclusion.

The issues at play on this appeal about such language simply did not form part of

the dispute in Oliveira and, consequently, did not receive judicial comment or

analysis.

The element of “reckless” in intrusion upon seclusion

[59] Second, Ms. Demme argues that since the tort of intrusion upon seclusion

covers conduct that is “intentional or reckless,” the motion judge erred by failing to

find a mere possibility existed that the claims alleged against her could be regarded

as claims for damages for bodily injury arising out of reckless conduct. That

possibility would bring the claims within the Policy’s definition of “occurrence”

(“neither expected nor intended from the standpoint of the Insured”) and remove

the claims from the intentional act exclusion (“bodily injury … expected or intended

from the standpoint of the Insured”).

Page: 24

[60] I am not persuaded by that submission. The starting point must be the

formulation of the elements of the tort of intrusion upon seclusion adopted in Jones.

The motion judge relied on the statement of the elements found at paras. 70 and

71 of Jones:

I would essentially adopt as the elements of the action for

intrusion upon seclusion the Restatement (Second) of

Torts (2010) formulation which, for the sake of

convenience, I repeat here:

One who intentionally intrudes, physically or

otherwise, upon the seclusion of another or

his private affairs or concerns, is subject to

liability to the other for invasion of his

privacy, if the invasion would be highly

offensive to a reasonable person.

The key features of this cause of action are, first, that the

defendant’s conduct must be intentional, within which I

would include reckless; second that the defendant must

have invaded, without lawful justification, the plaintiff’s

private affairs or concerns; and third, that a reasonable

person would regard the invasion as highly offensive

causing distress, humiliation or anguish… [Emphasis

added.]

[61] Although the Jones decision does not contain a definition of “reckless,” it

places reckless conduct side-by-side with intentional or deliberate conduct. Jones

adopted the Restatement’s formulation of the tort as involving an intentional

intrusion. As well, the decision limited claims for intrusion upon seclusion only to

“deliberate and significant intrusions of personal privacy”: Jones, at para. 72. One

cannot tease from the discussion in Jones any support for the proposition

Page: 25

advanced by Ms. Demme that Jones’ inclusion of a reckless act within the tort of

intrusion upon seclusion could involve unintentional conduct.¹¹

[62] As well, Ms. Demme’s contention that reckless conduct possibly could

amount to unintentional conduct runs counter to the thrust of Canadian insurance

jurisprudence. The caselaw has been prepared to accept that an “accident” can

include a negligent or grossly negligent act: General Principles of Canadian

Insurance Law, at Ch. 3, B.2.a. Nevertheless, “accident” conveys the idea that the

consequences of certain actions are unexpected: Martin v. American International

Assurance Life Co., 2003 SCC 16, [2003] 1 S.C.R. 158, at paras. 13-15. By

contrast, in Mutual of Omaha v. Stats, [1978] 2 S.C.R. 1153, both the majority and

dissenting judge of the Supreme Court proceeded on the basis that what is

typically called reckless conduct could not be regarded as accidental. The majority,

at p. 1165, applied the principle that “[i]f … the person realized the danger of his

11

The meaning of reckless conduct for the tort of intrusion upon seclusion was touched upon by the

decisions of the Divisional Court in Owsianik v. Equifax Canada Co., 2021 ONSC 4112, C.C.L.T. (4th) 243

(Div. Ct.) but only in passing as the issue of the meaning of reckless conduct was not central to the

reasoning of either the majority or the dissenting judge. The majority simply wrote, at para. 55, that “[t]he

intrusion need not be intentional; it can be reckless.” The majority offered no further discussion of the

concept. In her dissent, Sachs J., wrote, at para. 44: “In this case, as in Jones, the allegation is that the

invasion was significant and that it was deliberate, a concept that Sharpe J.A. recognized could encompass

recklessness.”

In a later decision, Del Giudice v. Thompson, 2021 ONSC 5379, 71 E.T.R. (4th) 23, Perell J. stated at para.

142: “The tort of intrusion upon seclusion has a mental element of intentionality. The Plaintiffs’ pleading

seeks to elevate its copious allegations of negligence into recklessness, but carelessness is not the same

mental state as intentionality or recklessness.”

Page: 26

actions and deliberately assumed the risk of it … his actions could not be

characterized as accidental.”¹²Martland J., in dissent, stated, at p. 1173, that “[i]f

a person voluntarily embarks upon a foolhardy venture from which personal injury

could be foreseen as an almost inevitable consequence it cannot properly be said

that when the mishap occurs, it is an accident.”

[63] The formulations in Stats closely resemble the concept of recklessness in

Canadian criminal law as the attitude of one who, aware that there is danger that

his conduct could bring about the prohibited result, nevertheless persists, despite

the risk – that is to say, it is the conduct of one who sees the risk and takes the

chance: Sansregret v. The Queen, [1985] 1 S.C.R. 570, at para. 16.¹³

[64] Whether one uses the concepts of recklessness described in Stats or our

criminal law, reckless conduct stands very close to the intentional end of the

conduct spectrum, far away from the unintentional end where Ms. Demme tries to

place it.

[65] Finally, stepping back from the consideration of the definitional elements of

the tort and the concept of recklessness, Ms. Demme’s duty to defend application

proceeds against the background of allegations that she unlawfully accessed

¹²This formulation drew upon the decision of Grant J. in Candler v. London & Lancashire Guarantee &

Accident Co. of Canada (1963), 2 O.R. 547 (Ont. H.C.).

¹³See also, R. v. Zora, 2020 SCC 14, 446 D.L.R. (4th) 358, at para. 117.

Page: 27

patient records thousands of times over the course of a decade. For Ms. Demme

to contend that in the face of such claims there exists a “mere possibility” that her

alleged conduct could be characterized as causing injury that was neither expected

nor intended from her standpoint simply lacks any air of reality.

The intention to obtain pills as distinguished from the intention to access

patient records

[66] Third, Ms. Demme contends the motion judge erred by failing to accept her

argument that a material distinction exists between her intention to obtain the

Percocet pills and her intentions regarding the patients’ records. Ms. Demme

concedes she intended to obtain the Percocet pills from the ADU machines.

However, she contends that her intrusions into patients’ records were not the result

of any intention on her part to injure the patients but, instead, merely the

unintended consequences of her intentional conduct to obtain the pills. As a result,

she argues, those unintended consequences constituted a type of bodily injury that

fell within the Policy’s coverage of an “occurrence.” Similarly, she submits that

unless an intentional act – her intentional conduct to obtain the pills – is

accompanied by an intention to cause bodily harm, the intentional act exclusion

does not apply.

[67] The motion judge did not accept her argument. As required by the pleadings

rule, he focused his analysis on the nature of the claims brought against

Ms. Demme in the Underlying Actions. The motion judge held that their true nature

Page: 28

is the intentional tort of intrusion upon seclusion, as defined in Jones. For that tort,

the relevant intention is the defendant’s intention to access private patient records.

If that is demonstrated, the nature of the tort is such that the intention to access

the records amounts to an intention to cause injury. That is because under the tort

the injury caused is the patients’ loss of control over their private information.

Drawing on those elements of the tort, the motion judge concluded that the

pleading of intrusion upon seclusion took the claims against Ms. Demme outside

the Policy’s definition of “occurrence” and, as well, within the ambit of the

intentional act exclusion.¹⁴

[68] I see no error in the motion judge’s conclusion. It flows logically from the

elements of the pleaded tort of intrusion against seclusion, which he found to be

the true nature of the claims against Ms. Demme.

Summary

[69] For the reasons set out above, I would reject this ground of appeal.

14

The character and content of the tort of intrusion upon seclusion, with the injury or loss caused by the

accessing of the private information, resembles, to some extent, the situation described by Professor Erik

S. Knutsen in his article, “Fortuity Victims and the Compensation Gap: Re-envisioning Liability Insurance

Coverage for Intentional and Criminal Conduct” (2014), 21 Connecticut Insurance Law Journal 209. There

he proposed, at p. 243, that the most sensible solution to interpreting the applicability of either the intentional

act fortuity clause or the criminal act fortuity clause would be to limit coverage denial to those circumstances

where fortuity is truly frustrated, namely “when a loss has been made certain to occur by the purposeful

conduct of a policyholder.”

Page: 29

VIII.

THIRD ISSUE: DID THE MOTION JUDGE MISAPPLY THE POLICY’S

CRIMINAL ACT EXCLUSION TO BAR ALL DEFENCE COVERAGE?

[70] Given that the motion judge did not err in his conclusions that the claims

pleaded against Ms. Demme in the Underlying Actions were not “occurrences”

under the Policy and fell within its intentional act exclusion, it is not necessary to

comment on the motion judge’s treatment of the criminal act exclusion.

IX.

FOURTH ISSUE: NULLIFICATION OF COVERAGE

[71] Finally, Ms. Demme submits that by concluding the claims against her for

intrusion upon seclusion did not give rise to a mere possibility of coverage and,

therefore, attract a duty to defend, the motion judge erroneously adopted an

interpretation of the Policy that nullified coverage for liability for bodily injury arising

out of “invasion or violation of the right of privacy.” Such an interpretation would

offend the principle that courts should avoid an interpretation of a policy that would

render the insurance protection obtained nugatory and would enable the insurer to

pocket the premium without risk: see Consolidated-Bathurst v. Mutual Boiler,

[1980] 1 S.C.R. 888, at p. 901.

[72] I am not persuaded by this submission. The motion judge was alive to the

issue. He observed that the Policy language of “invasion of privacy” potentially

covers much more than liability for intrusion upon seclusion, a tort based on

intentional conduct. Since the Policy would cover bodily injury arising from

Page: 30

negligence-based invasions of privacy, he concluded the lack of coverage for the

intentional tort of seclusion upon intrusion would not nullify the Policy’s coverage.

As he stated at para. 71:

Intrusion upon seclusion is, by definition, an intentional

tort that requires an intention to access private

information. Other privacy torts do not necessarily

include an element of intentionality. One could imagine a

wide range of claims for a breach of privacy that was not

intentional, including a negligent release of private

information, improper faxing of private information,

incorrectly sent e-mails, erroneous attachments to

correspondence or e-mail, loss of medical records,

records improperly disposed of and negligent storage of

records. Those claims for negligent privacy breaches

would fall within the insuring agreement of the Policy.

[73] I see no error in that conclusion; it was a reasonable interpretation of the

scope of the Policy.

X.

DISPOSITION

[74] For the reasons set out above, I would dismiss the appeal.

[75] Based on the agreement of the parties regarding the costs of the appeal,

Ms. Demme shall pay HIROC its costs of the appeal fixed in the amount of

$15,000, inclusive of disbursements and applicable taxes.

Released: June 30, 2022 “E.E.G.”

“David Brown J.A.”

“I agree. E.E. Gillese J.A.”

“I agree. G. Pardu J.A.”